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About this episode

January 24, 2018

Richard Reeves

Hosted byDouglas Blackmon

The promise of America is that any person born on the bottom rung of this country’s socioeconomic ladder can climb their way to prosperity. But today a new challenge has emerged: massive income inequality. The Occupy Wall Street protests in 2011 introduced us to the notion that the top one percent is hoarding wealth and opportunity. But is that really where the focus should be? Or is the real problem the top 20 percent—upper-middle-class families with incomes above $100,000? That’s the argument of our guest this week. RICHARD REEVES is a senior fellow of economic studies as well as co-director of the Center on Children and Families at the Brookings Institution. His new book, Dream Hoarders, argues that our country’s often well-meaning top-fifth of earners actually perpetuates inequality.

Transcript

00:41 Douglas Blackmon: Welcome back to American Forum. I’m Doug Blackmon. It is an axiom of American ideals that with hard work and self-sacrifice, any person born on the bottom rung of this country’s socioeconomic ladder can climb their way to prosperity. As President Obama and a thousand others have said, if we give it our all and play by the rules, anyone can succeed. That’s the American dream, and we’re taught at school, in church, and through television, books, and movies that this is the great difference between our society and the stodgy, class-based ones in England and the rest of Europe that we violently broke away from back in 1776. That American dream is predicated on the idea that we all are given an equal opportunity to succeed. Of course, until very recently that wasn’t even remotely true. African Americans were enslaved and then segregated. Jews were ostracized. Women were oppressed. All minorities were denied education and work opportunities. Native Americans were enslaved, robbed, segregated, and driven from their land and possessions by the U.S. Army. All the while, the government provided vast benefits for white Americans, especially for men, giving them millions of acres of land stolen from others, building them schools and universities like the one we’re broadcasting from today, openly providing loans, tax breaks, healthcare, and preferential treatment in every aspect of our society right up until, well, very recently. Only over the last 50 years did that meaningfully change as movements for civil rights and women’s equality challenged our government’s supreme commitment to affirmative action for white men. That change unleashed tremendous levels of new educational and economic achievement by, in particular, millions of African Americans and women of all races. Yet, as opportunity finally became more genuinely available in America, a new challenge to the American dream has emerged: massive income inequality. The Occupy Wall Street protests in 2011 introduced our national discourse to a now iconic disparity, the top one percent of the population’s hoarding of wealth and opportunity from the other 99 percent of Americans.

The Occupy Wall Street protests in 2011 introduced into our national discourse a new and now iconic disparity, the top one percent of the population’s hoarding of wealth and opportunity from the other 99 percent of Americans. The Occupy movement laid the blame for the country’s decreasing economic mobility squarely at the feet at the most elite of America’s elites. Then, in 2015, Donald Trump, the king of the elite, wealth one percent, baffled political observers when he began reaching across class lines to declare the American dream “dead” for the forgotten men and women of our country, shuttered right alongside their factories, mines, and stores on Main Street. He fueled a wave of populist passions against Washington elites and rode it all the way to the Oval Office. But is the top one percent really where the focus should be, or is the real problem in the top 20 percent, upper-middle-class families with incomes above $100,000, like mine and millions of you PBS viewers all across the country? That’s the argument of our guest this week. Richard Reeves is a senior fellow of economic studies as well as co-director of the Center on Children and Families at the Brookings Institution. His new book is titled Dream Hoarders: How the American Upper Middle Class is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It. It argues that our country’s often well-meaning top-fifth of earners actually perpetuate inequality and stop others from climbing the ladder of American success. Thanks for being here.

Richard V. Reeves: Thank you for having me.

04:29 Blackmon: So let’s get at your—your primary argument. We’ve heard so much about income inequality and this new axiom that income inequality is bad, but the—the distinction that you’re trying to make is that we focus too much on this very elite, the very richest, those who have amassed this very high percentage of all of the wealth of American and all of the—the earnings of America in any given year. But so—but what’s the difference between this upper-middle-class group that you’re talking more about and—and the income inequality argument as we’ve been hearing it.

Reeves: Well, I think the—the main difference is economic. It’s simply that, obviously, one percent—to get into the top one percent, you have to be that much richer. So, in terms of income, that puts you in the $400,000 a year plus bracket, roughly, now. The top 20 percent, I think, now is actually closer to—if you’re above about $125,000 a year household income, so a clearly much bigger group. My view looking at the trends in income inequality is that the “We are the 99 percent” analysis is both wrong and unhelpful. It’s empirically wrong because there’s growing inequality below that level. You’re seeing a kind of breaking away. You’re seeing people pulling away well below the top one percent, and I think it’s unhelpful because it has allowed too many people to imagine that the inequality problem is always about people who are richer than themselves. So when people talk about inequality, it’s always “those rich—those people up there, the rich” who are the problem. And sometimes I think it may be closer to home, and we may need to look in the mirror and consider that we may be part of the problem. It’s not just those rich people at the top.

05:58 Blackmon: We always like to imagine that—that either the people above us or below us are the real problem.

Reeves: I think that’s right. We’re always either point down at the poor and wondering, you know, “What do we do to help the poor? What’s wrong with them?” or up at the rich, so we blame Wall Street.

So at the May Day Occupy Wall Street march, one in three of those marching had earnings of more than $100,000, not just household income but earnings. That puts them in the top 10 percent of income earners marching against the rich, so you do see this kind of class warfare taking place within the top 20 percent or the top 10 percent. I mean, the envy seems to be greatest of those who are almost at the top for those who are right at the top, and I think that’s unhelpful to our politics. And I think what you’re seeing in the—in the way that it’s coming through the political framework, including in the presidential election, is that, actually, a lot of what was happening was about class as well as race. It’s obvious that race played a very big part, but there’s also this sense of, actually, a lot of people who were drawn towards Trump weren’t anti-rich. They were anti-professionals, anti-elites, anti-experts, anti- those sorts of people that kind of tell them what they’re doing wrong and run all the institutions, assume that they’re going to get a good, four-year college degree, have a good, big house, etc.

So I think it was more interesting—I think Trump was able to sort of tap into some class discontent in a way that was channeled towards not the top one percent or 0.1 percent, not the billionaires or the millionaires, but the professionals, that white-collar group that I call the upper middle class.

07:22 Blackmon: But so one thing, I think, that is consistent across all the various analyses of income inequality is that below the groups you’re talking about, below the upper middle class and the—and that top one percent, the elite—the possibility of people leaving that and moving up the economic ladder seems to have at least been stymied or become more likely to be—to be stuck there than people at least once believed to be the case. That’s right.

Reeves: That’s right.

Blackmon: Yeah.

Reeves: And certainly by comparison to other countries, and so, as you began the program with the idea of the American dream, it’s very strong rhetorically, but not empirically.

So if you actually look at the chances of being upwardly mobile, they’re lower in the U.S. than in many other countries, and that’s partly because of the structural racism that you referred to and that black Americans in particular are more likely to be stuck, but it’s also just because this kind of bottom 80 percent, broadly, haven’t seen much income growth in the last few decades. They’re moving less geographically. There’s less—much less wage movement because, to the extent that women’s wages have gone up, men’s wages have gone down, essentially canceling each other out. So the bottom 80 percent of the U.S. income distribution looks quite similar today to how it looked 40 years ago. Meanwhile, the top 20 percent of earners and households are pulling away. And, sure, the closer you get to the top, the more you see that pulling away. But if you want to see where the gap is opening up—and I don’t think it’s just an economic gap. I think it’s a class gap, and I say that as someone who comes from a class-bound society, a class gap that is opening up at around that 80—80th percentile. That kind of top fifth is where we should be thinking.

08:50 Blackmon: In a class-structured society that has very well-defined classes, there is this assumption that you’re born into a spot in it and you’re not going to—and you shouldn’t expect to move in the traditional sense, that you’re not going to move from one to the other. But it is by nature of the birth to begin with. What we’re looking at in the U.S. is this emergence of a—of a class, but then, when you say “hoarders,” the dream hoarders, “hoarders” suggests an active intention, a decision to—to, “We’ve got it. We’ve made it into this space. Maybe we weren’t born into it, but we’ve made it into this class, and now we’re hoarding it specifically to exclude others from coming into it.” There’s a kind of intentionality to the suggestion, but what do you mean by that? What are you talking about?

Reeves: The class conscious is very different here to the U.K. where I come from. The U.K. is a very class-conscious society, and that’s a very bad thing in many ways, but the good thing about it is that it makes people aware of class divisions and aware of structural class divides. The U.S. is very sensitive for obvious and good reads to structural racial divides. Those overlap with structural class divides that Americans don’t see as clearly because of this sense that it’s a classless society, meritocracy, Horatio Alger. There are actually a lot of people in the U.S. who are born on third-base thinking they’d hit a triple because of this sense of meritocracy, right?

“Well, I got here because of my own hard work and kind of brilliance.” There’s no sense of guilt. At least posh people in the U.K. feel guilty some of the time. (laughter) And the reason why that—that guilt matters is that it—it signals something about, “I’m aware that some of my success is due to factors that are not simply my own responsibility.” How do you—how do you get to—then, what happens is, the hoarding comes precisely because those at the top are able to convince themselves they’re there as a virtue of their own merit, their own brilliance and diligence. They can then start to rig the tax code so that they get disproportionate benefits from tax expenditures. They can start to rig the housing market so that they can protect the value of their houses. They can start to dominate the institutions of higher education like the one we’re in now so that their children get to enjoy a good, quality, four-year college. They are able to shift the market in a way that ensures their success and, most importantly, ensures the success of their children in a way that can only be described as class perpetuation, but they do so under the illusion of classlessness. So the camouflage of classlessness and meritocracy is now very damaging to the idea of the American dream where we—where we started.

11:11 Blackmon: So how do we separate out, as we try to figure out where the real—the problem really is, how do we separate out the—the kind of selfishness of kicking the ladder away for the people who haven’t made the climb up yet? How do we—how do we acknowledge that there’s a dimension of that but at the same time also acknowledge that when you’re trying to change a society from one that is predominately very poor people engaged in subsistence farming, when you’re trying to modernize that, well, moving people up the ladder is actually an easier thing, particularly when the direction—when the wind is blowing in the right direction, you can change things really fast, put in good roads, put in bridges, you know. Basic infrastructure results in huge changes across the whole society. But as things get more and more complicated, it actually—it gets harder and harder to move people up the ladder. So, on the one hand, one of the things you point out is that entry into the upper middle class today may well require two degrees, you know, a bachelor’s degree and a graduate degree.

It used to be that one degree was kind of the ticket into—into that—that kind of affluence. Now, is that an example of—of kicking the ladder away, or is that just an example of—that’s just the evolution of society, and you just need to have more credentials, more knowledge, more expertise? That’s how we sort out the really, really high achievers from the not-so-high achievers.

Reeves: Well, actually, sometimes I think it’s maybe not two degrees but four degrees, because, of course, with the increase in the number of women, there are now more women graduating from four-year colleges than men.

And what you’re seeing is that those who have a college degree are very likely to marry somebody else with a college degree and, actually, if they’ve got a postgraduate degree to marry someone who has a postgraduate degree, and their earnings are higher. So what you’re seeing is at a household level this kind of educational disparity and the earnings disparity is amplified at the household level, but I think—so what’s the—what’s the problem here? If you’re getting well educated, you’re getting your kids to be well educated. You are working hard at whatever your profession is. Aren’t you doing everything right? Isn’t that what we want people to do? Yes. But the question then becomes at what point does the natural desire to do well for ourselves and our children conflict with or at least come into tension with other values like equal opportunity, like others having a chance to rise as well. When do we actually start rigging the system as opposed to simply winning within it? And then, I think, when you look at things like the way that the housing market works in the U.S., even the way that admissions to four-year colleges works in the U.S., access to internships, those sorts of—those are the kinds of examples where, actually, we’re rigging it in our favor. So at that point, the natural preference to do well has become something else.

13:38 Blackmon: The idea that the rich are going to get richer. In the Gospels, we’re told that Jesus said, “And the poor will always be with us,” and the—so in a way this just sort of seems like the natural outcome of a modern society, but is that the case, and we’re just—the natural progression of things is to a place that gets less and less egalitarian, or has something gone wrong?

Reeves: Well, that’s the—so the fear is that it—this gets kind of baked in intergenerationally. So the sharp—one of the sharpest criticisms I’ve had from—from the right is, “You’re basically pointing to people who are doing everything right, getting educated, staying married, looking after their kids, and trying to make them feel bad about it.” Right? That’s basically—it’s a good, sharp criticism, because, of course, there’s a lot of truth to that, which is that, actually, the upper middle class are doing a lot of things. You’ve mentioned a lot of things they’re doing well, but what that means is, if you think about the next generation, it seems to me that the idea of the American dream is that there’s a kind of restarting of the competition with each generation. And, of course, you’re never going to create the used—the overused metaphor of a level playing field with each generation of the reasons you’ve ident—there will always be inequality in life chances, but surely our goal is to try to reduce the inequalities that come from the lottery of birth. I mean, who your parents are is entirely random. How you raise your children is not, of course, so what does that mean? Do we say to the child who actually wasn’t born into the upper middle class with well educated, affluent parents but is born into a kind of struggling town, some of the places you mentioned? Do we say, “Well, that’s just bad luck. When we said equal opportunity, we didn’t mean it?” So what it means is that we have to—we have to invest very heavily in the opportunities for those who are not as fortunate as those of us who are in the top 20 percent. Where is the money for that going to come from? From us. So we need quite radical redistribution not only of our economic resources but also of those opportunities so that each generation gets a chance the run a race again. It will never be an entirely fair race, but do we really want to end up with a society where we say, “Well, it’s never going to be fair. My kids are always going to do better than yours. And, by the way, there’s almost no limit to what I can do to ensure that my kids are more successful than yours even if it means my kids take a place that your kid might otherwise have gotten because all is fair in love and war?” And it seems as if this sense of entitlement that the American upper middle class has now means that they will engage in practices which would be unthinkable elsewhere and would have been unthinkable in other—other parts of U.S. history like legacy preferences in college admissions, just for one example.

16:05 Blackmon: Well, talk—but talk through those. So there are legacy preferences. You talk about internships. That’s not something that people typically point at as a nefarious area of American life, uh, but rattle through some of those examples of rigging as you see them.

Reeves: Well, those are two good ones. I mean, you’re right. People—as a European, it’s shocking to me. The internships, which are quite important in many professions now, are just handed on the—on the basis of who you know as a favor to somebody, and that’s—I’m not making a partisan point here. Bill de Blasio, the mayor of New York, gave internships to his two children in City Hall against the stated policy of his own administration. He had to get an ethics waiver to do it. What was surprising about that was that no one blinked. It would have finished his political career in the U.K. to do that because the whole idea that internships, which are—if they’re important, if they’re valuable, then they shouldn’t be allocated on the basis of who your parents are—that’s a hereditary principle at work in the labor market—any more than a job should be handed out on the basis of who your parents are. So that’s one example. Now, I’m not saying that that’s going to change the world, but it’s a good illustration. Legacy preferences in college admissions, the fact that there’s a hereditary principle at work as we’re letting people into four-year public as well as private colleges, unthinkable in the United States in the 19th century, introduced in the 20th century for anti-Semitic reasons, and now a standard way for those who are the top of the income ladder to help give their kids a better chance of getting into a high-quality college and therefore do better, a hereditary—it has racist consequences, of course, but it’s also a classist—it’s a classist mechanism.

And then, I mentioned this, but the way that the local zoning laws work to restrict entry to the cities and areas that have the most economic opportunity is a growing problem. You mentioned, I think, in the intro that there was lots of land for white men. Actually, there isn’t that much land anymore in the places where the economic growth is, and land is getting very expensive in the places where there’s economic growth. And one of the reasons it’s expensive is because it’s so overregulated. The U.S. has a highly regulated housing market, and what that means is that if you’re on the right side of that you’ve got an expensive house. Thank you for the mortgage interest deduction, Uncle Sam. You can keep out lower-income people from your neighborhood, protect your local school, etc., so you end up with a system that no one intended, necessarily, to be a class reproduction machine, but it’s a very effective one. The U.S. class reproduction machine is more ruthlessly efficient than the one in the U.K., and that’s my discovery, my disappointment as a new American, to discover that actually underneath this veneer, this Horatio Alger veneer, that actually your class system really is humming a bit more quietly than the one in the U.K., but, boy, does it work well.

18:44 Blackmon: And that’s definitely logical on the—in the zero-sum game equation, this idea, as you say, that if there are a certain number of seats at the university and you want more poor kids to take some of them, then there’s some—more black kids to be in some of those seats, then some white kids are not going to get to be. That is the case.

Reeves: Yes.

Blackmon: And the glass floor, um, notion works, that there’s a limited amount of space in that upper class unless the glass floor is the floor of an elevator, and the elevator is going up and that the definition of these economic—of the quintiles is changing. It’s just like that—in the 1930s, to be in the bottom, the lowest quintile of American economics, was to be hopelessly, desperately, on the verge of starvation, poor.

Reeves: Yeah.

Blackmon: To be on the lowest—in the lowest quintile today is to be—to have a lot of difficulty, but the odds that you’re actually on the verge of starvation, no matter what anybody says about hunger in America, it’s extremely unlikely.

When I was a kid growing up in the Mississippi Delta, there were still people dying—

Reeves: Yeah. Yeah.

Blackmon: —of hunger in the mid-1960s or freezing to death in the middle of the winter. You know, it was a fact. That doesn’t happen anymore. So if the elevator is going up—and that is the biggest counterargument, I think, to your whole proposition, is that if the—if the whole—if the pie is expanding, as some like to say, then, in fact, these sorts of things are OK, are more OK.

Reeves: Yeah. Well, I think we should just be clear that there are two things going on there. One is people getting better off over generations and over time. And is that good? Yes. Is every—is anyone against that idea? No, basically. So, actually, to write a book saying it would be better if people were better off and that fewer people died in the Mississippi Delta, it’s not a provocative argument. Now, how you do it is a different matter, but there’s something else, which is your relative position. Even if the escalator is going up quickly, that’s better for everybody, and maybe the person in the middle isn’t troubled about the fact that the people at the top seem to be the same every generation. Maybe they’re not troubled about that because they themselves are doing better, but I’m troubled by it because I still think that if you want a society that prides itself on fairness and equal opportunity, and you looked, and you saw the elite perpetuating itself across generations, then you’d start to worry about that. You’d start to worry that your elite wasn’t actually drawing from the whole of society.

You’d start to worry about the fact that you weren’t getting the best and the brightest. You’d start to worry that you were morphing into exactly the thing that I thought America tried not to be, which was a hereditary society. So if you take my old country, where you—we have a very, very hereditary head of state, a monarch, so we know—there’s no surprise. You don’t get T-shirts in the U.K., “Future queen” or “Future king” in the same way that you do in the U.S. (laughter) In the U.S., people have that, and they’re not kidding, right? We know accidents—we know who is going to be on the throne. And you might say, “We don’t care about that as long as everyone else is getting better off.” OK. If you end up with something similar, not obviously in the same scale, but if you end up with an elite that’s perpetuating itself, if we know that our kids are going to remain on that top rung every generation, are we OK with that just so long as everybody else is getting better off, too? And I think that’s the central question here. There are different kinds of fairness, different kinds of mobility, and you can—you can want both. But I don’t think it’s good enough for us just to say, “Look, so long as we help everybody else, we can continue to make sure we stay at the top and our kids stay at the top.” I think there’s a moral principle at stake here which requires some movement downwards as well as upwards in terms of—in terms of relative mobility, or you’ve got a hereditary society, and we should at least be honest about that.

22:12 Blackmon: And, ultimately, you offer up a prescription of sorts where you talk about initiatives that ought to happen to reduce unintended pregnancies through better contraception, some of the sorts of things that already are—are—have had success with certain groups. You talk about more home visits by educators to improve parenting of kids, better teachers for kids in poor schools, funding college differently and fairly, dealing with exclusionary zoning that you were talking about, ending legacy admissions, opening up internships. You’ve got a number of these kinds of things, all of which, if we added them together, would represent a—a pretty extraordinary escalation of the intervention of government into—into these issues and lives and are probably beyond the capacity of any individual member of that upper class to—to make changes to. So, in the end, you’re offering a structural prescription, but really what you’re saying is that there’s a compelling moral argument for members of this upper middle class group to support some sort of a political agenda—

Reeves: Sure.

Blackmon: —that would bring the government very, very much more into the lives of—of that other 80 percent of Americans.

Reeves: Yeah, so the—I had to have a chapter on policy because I work for a policy think tank, but one reviewer said that this was a moral argument thinly disguised as a policy pamphlet. (laughter) That was the nicest thing anyone could have said about the book because that’s exactly what it is. You’ve listed policies that I think could change things quite significantly, but I think the problem is creating a culture, a political culture within which those sorts of policies become thinkable, within which those sorts of policies are doable—that requires a change of heart as well as mind. So Hofstadter wrote about the progressive era and the era running up to it. It was as much an affair of the conscience.

There was inward criticism, inward reflection, and I do think that something of that is required now, and it requires us to start from where we are, stand in our own shoes, think about our own lives, our own communities, are own neighborhoods, and build out from there a culture that will be more accommodating of the kinds of policies that we need to help the bottom 80 percent. It’s not mysterious, the things we need to do to create more equal opportunities, to refinance higher education, to think about the allocation of teachers, to think about quality healthcare. These aren’t—they’re—it’s not a mystery what we need to do. The challenge is getting a political culture that will support those sorts of changes, and I’ve come to believe that one of the biggest obstacles to the creation of a political culture that will support that is the detachment and sense of entitlement and separation of the upper middle class. And unless the upper middle class themselves come to see themselves as part of the problem and therefore of the solution, then I think we’re going to be stuck. So if we’re serious about inequality and we’re looking for the face of it, we might want to start by looking in the mirror.

25:09 Blackmon: Richard Reeves, thanks for being here.

Reeves: Thank you.

Blackmon: What do you think about the hoarding of the American dream? What’s your perspective? If you are a member of the upper middle class or a part of the 80 percent struggling to climb the ladder, no matter which rung you’re on, let’s continue this discussion. Reach out to me using the email on your screen or on Twitter, @douglasblackmon. You can also follow our guest, @richardvreeves. As always, visit millercenter.org to keep updated on news and events, watch other episodes, and visit us on Facebook to catch live tapings of the show. See you next week. (applause) All right. Great. All right.